Group EBITDA of US$418 million (excluding discontinued operation)
Operating Cash Flow of US$390 million*
Profit Attributable to Equity Holders of US$139 million
Interim Dividend of US6.66 cents per ordinary share
Financial and Operational Highlights – First Half 2019
OOIL’s Container Transport and Logistics business reported EBIT of US$153 million, representing an operating margin of approximately 4.6%.
Liner liftings grew to 3.4 million TEU.
No new-build vessel was delivered, and no new order was placed by the Group.
Balance Sheet Highlights
Group balance sheet remains one of the most robust in the industry
Total net debt to equity ratio was 0.41 : 1 as at 30th June 2019
Liquid assets of US$2.0 billion as at 30th June 2019
OOIL Financial Results – First Half of 2019
Orient Overseas (International) Limited and its subsidiaries (the “Group”) today (Aug. 26) announced a profit attributable to equity holders of US$139.0 million for the six-month period ended 30th June 2019, compared to a loss of US$10.3 million for the same period in 2018.
Earnings per ordinary share for the first half of 2019 was US22.2 cents, whereas loss per ordinary share for the first half of 2018 was US1.6 cents.
The Board of Directors is pleased to announce an interim dividend of US6.66 cents per ordinary share.
In the first half of 2019, despite an economic environment filled with uncertainties, and with seemingly slowing growth in terms of demand for container shipping services, OOIL’s financial outcome for the period is a meaningful improvement from the same period last year, and represents a pattern of steady progress in results throughout the second half of 2018 that continued through the first half of 2019. The good results are attributed to the joint efforts of the management team and all staff of OOIL under the guiding principle of “outperform the market, drive innovation, lead the times”.
In this period, container shipping industry has been quicker in responding to ever changing demands in its response to the underlying condition of our ever-changing markets and more complicated global economic and trade situations. In terms of medium and long-term supply growth, the containership orderbook, as a percentage of the total fleet, is at low levels not seen for more than a decade. Moreover, there are reports that scrapping of vessels has been greater this year than in the same period in 2018, a trend that may continue once IMO 2020 low sulphur regulations come in and render older vessels less economic. In the short term where reduced levels of demand have caused existing operations to be unprofitable, the industry’s supply will have to react quicker to meet the changing demand.
Compared to the first half of 2018, OOCL liner liftings increased by 3.2%, but revenue levels increased by 6.5%. Market growth did indeed slow down in some trade lanes, but in many cases this slow down in volume growth was outpaced by an improvement in the freight rates.
The average cost of bunker recorded by OOCL in the first half of 2019 was US$441 per ton compared with US$403 per ton for the corresponding period in 2018. The rise in both the fuel oil and diesel oil price has resulted in the increase of bunker costs by 3% in the first half of 2019 compared with the corresponding period last year.
In the first half of 2019, no new-build vessel was delivered, and no new order was placed by the Group. Currently, the six 21,413 TEU G-Class vessels delivered in 2017-2018 are among the largest containerships in our fleet.
OOCL Logistics revenue and contribution for the first half of 2019 decreased by 2.1% and 6.9% respectively compared with the same period last year. The contribution from International Supply Chain Management Service decreased by 2.9% due to downsizing of some major retail customers. Contribution from Import/Export Services decreased by 4.5%. The contribution of depot business dropped by 21.5% due to tariff rate reduction. Lowering utilization of existing warehouses during the transition of replacing loss-making customers and large startup cost of new warehouses, as well as fierce price-cutting competition in transportation business were all key activities contributing to the 16.0% drop in Domestic Logistics contribution.
The Group’s property investments include its long-standing ownership of Wall Street Plaza located in New York. Based on an independent valuation as at 30th June 2019, the assessed market value remained at US$310 million.
In the first half of 2019, Hui Xian Holdings Limited, the original developer company of Hui Xian REIT, declared a cash dividend to its shareholders, of which the Group’s shares amounted to US$7.9 million. In addition, the Group also received a distribution of US$0.5 million from its direct holding of Hui Xian REIT.
Since last July, we have implemented “Dual Brand” strategy for achieving synergy benefits and improving service quality. It is pleasing to note that our efforts to generate significant synergy savings through co-operation within the COSCO SHIPPING Holdings Co., Ltd. (“COSCO SHIPPING Holdings”; SHA: 601919; HKEx: 1919) group are bearing fruit. In accordance with our “Dual Brand” strategy, OOCL continues, with our “We take it personally” spirit, to grow ever closer to our customers, and to be customer focused, creating value for them through our sales process, through our customer service, through our documentation processes and our global network support. We have also achieved significant synergy benefits through network planning, equipment pooling, procurement and IT. During the period, we have continued to grow OOCL, beginning new services to Latin America, the Caribbean and Africa in order to provide more globalized service to customers, and OOCL’s total liner liftings increased by 3.2% compared to the first half of 2018. Meanwhile, our unit cost (excluding bunker cost) has been on a downward trend as the result of synergies gradually achieved in cost saving.
At the time of writing, we edge closer to the conclusion of the sale of our container terminal in Long Beach, California. The transaction announced by us on 29th April 2019 not only generates meaningful cash proceeds now, but also ensures that OOCL will continue to have access to a highly automated and efficient terminal that meets our needs.
CargoSmart has announced the execution of Global Shipping Business Network (“GSBN”) Services Agreements with various Maritime Industry operators to accelerate the digital transformation of the industry. GSBN initial preparatory efforts to explore and test the feasibility and value of using blockchain technologies are underway and showing promise.
The continuing growth of the Group and its good trading performance, together with achieving the projected synergy benefits, will drive even greater success. Together, with the OOCL “We take it personally” spirit, a world-class container shipping integrated service provider is being built, which is a goal that will surely provide great benefit to shareholders, customers and employees alike.
As at 30th June 2019, the Group had total liquid assets of US$1,988.5 million compared with debt obligations of US$618.3 million repayable within one year. The net debt to equity ratio remained low at 0.41 : 1 as at 30th June 2019. The Group from time to time prepares and updates cashflow forecasts for asset acquisitions, to serve project development requirements, as well as working capital needs, from time to time with the objective of maintaining a proper balance between a conservative liquidity level and an effective investment of surplus funds.
OOIL owns one of the world’s largest international integrated container transport businesses which trades under the name “OOCL”. With more than 370 offices in over 80 countries/regions, the Group is one of Hong Kong’s most international businesses. OOIL is listed on The Stock Exchange of Hong Kong Limited.